IntroductionRising wholesale energy prices across Europe have squeezed residential retail margins in a market dominated by large asset heavy players .
This report highlights the potential commercial opportunities that exist for asset light players in the wake of an easing of wholesale prices and the long term sustainability of this model.ScopeAn assessment of the fundamental drivers of success for asset light retailers in European B2C energy retailA comparative benchmark of the level of effective competition across major European markets based on an innovative scoring methodologyAn understanding of the key challenges for asset light retailers to overcome including an assessment of the demand requirements of key competitorsA comparison of revealed consumer behaviour with regards to switching energy supplier based on aggregated surveysHighlightsIf the commodity cycle turns and wholesale prices were to start on a downward trend, reversing recent rises, this could create an opportunity for asset light retailers to enter the B2C residential market, pricing at a discount to large incumbent providers that presently dominate the European retail landscape.Switching in European markets is variable with no one single country having seen over half of its customers switch from their original energy providers post liberalisation.
The vast majority of major European retailers own more generating assets than the volumes of power they supply and are insulated against a rising wholesale market.Larger utilities benefit from operational advantages, with larger European utilities enjoying Cost-to-Serve advantages of up to 13%.
This is telling over the long term, however in the short term asset light retailers may have sufficient procurement advantages to be able to compete effectively.Reasons to PurchaseUnderstand the challenges an asset light player must overcome to gain and retain customersMaximise the advantages held over structurally hedged players who have less flexibility to react to a falling wholesale marketAssess the investment potential of the asset light model as a viable long tem option